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More than 55 million people are currently covered under Medicare. This Medicare 101 guide covers all the essential info you need to know.
Established by the federal government back in July of 1965, Medicare has since become a core aspect of the the American healthcare system. According to the latest numbers from the Kaiser Family Foundation, more than 55.5 million Americans are Medicare beneficiaries. If you’re nearing 65 years old, then it’s likely that you’re starting to look at your Medicare options. We’ve put together this basic guide to Medicare so that you’re equipped with all the essential knowledge before you make any decisions on your healthcare coverage.
What Is Medicare?
Medicare is a federal social insurance program that offers health insurance for those 65 years and older, as well as some qualified disabled individuals under 65 years. Similar to Medicaid, it’s a government-backed program. Unlike Medicaid, though (which is supported by both federal and individual state governments), Medicare is backed exclusively by the federal government.
How to Determine Medicare Eligibility
Medicare eligibility requirements policies are the same for people regardless of where they live in the United States. Eligibility can be separated into two separate groups:
For Those 65 Years and Older:
The main group for which Medicare was set up. To qualify, you’ll need to fulfill two requirements:
- You must have been a U.S. citizen or permanent resident for more than 5 years, AND
- You must have paid Medicare taxes for at least 10 years.
For Those Younger Than 65 Years:
There are few cases where people under the age of 65 are eligible to get Medicare benefits. To qualify, you’ll need to belong to one of three groups:
- You’re permanently disabled and you’ve received Social Security Disability Insurance (SSDI) for at least the last two years; OR
- You’re suffering from end-stage renal disease (ESRD)/end-stage kidney disease and need to undergo continuous dialysis or need a kidney transplant; OR
- You receive Social Security disability benefits for amyotrophic lateral sclerosis (ALS)/Lou Gehrig’s disease.
Understanding the 4 Parts of Medicare
Medicare has four different parts: A, B, C, and D. Parts A and B are often associated with each other and grouped under what’s known as “Original Medicare”; Part C can also be called “Medicare Advantage”, and Part D which covers prescription medication.
Part A: Hospital Insurance (part of Original Medicare)
Medicare Part A covers:
- Inpatient hospital care;
- Stays in hospitals and skilled nursing facilities (there are limits on time);
- Home healthcare services (like home health visits);
- Hospice care; AND
- Any necessary medical supplies and drugs administered during your stay.
Part A doesn’t cover:
- Any doctors fees associated with the care you receive during your hospital stay;
- Hospital fees deemed medically unnecessary (personal care items, private duty nursing, or having a TV or phone in your room); AND
- Prescription medication (and supplies).
Medicare Part A Costs:
Each of the benefits under Part A are subject to costs either in the form of a deductible or co-pay/co-insurance depending on the length of your inpatient care. Additionally, if you haven’t worked at least 10 years in the United States (and paid Social Security taxes along the way), then you’ll have to pay a monthly premium for Part A.
Part B: Medical Insurance (part of Original Medicare)
Medicare Part B covers:
- Outpatient medical services;
- Coverage for physician services and routine doctor visits;
- Preventive care and services (like flu shots and mammograms);
- Home health visits;
- Equipment or tests administered during outpatient services; AND
- Medication administered during outpatient visits.
Part B doesn’t cover:
- Prescription medication (and supplies).
Medicare Part B Costs:
There are three different costs associated with Part B:
- Monthly Premium: Ranges from $134 to $428.60 depending on your level of income;
- Annual Deductible: $183; AND
- Co-Insurance/Co-Pay: 20% of covered medical services.
Part C: Medicare Advantage
If you’re unsatisfied with Original Medicare coverage, then you’ll probably want to look into a Medicare Advantage plan instead of going with the government-provided Parts A & B. Some people choose Part C because they see Original Medicare as having too many coverage gaps. Part C gives consumers an option: either go with Original Medicare or go with Medicare Advantage.
Part C was established in 1997 and, for the first time, gave consumers the choice to opt out of the government-provided Original Medicare (Parts A and B) and instead find a Medicare-approved private insurer to provide the benefits that Parts A and B provide, plus some additional coverage.
Another option to consider, though, is to purchase a Medigap (also known as Medicare Supplement) plan on top of Parts A and B. To sort out which is the best option for you, read more about the differences between Medicare Advantage versus Medigap.
Medicare Part C (Medicare Advantage) covers:
- Everything covered by Parts A and B;
- Likely will cover prescription drug coverage; AND
- Possibly additional benefits or services (like hearing, vision, and dental services) depending on the private health plan you choose.
Things Part C doesn’t cover:
- Coverage will vary depending on the private health plan, so you’ll need to review the coverage details per your specific insurer.
Medicare Part C / Medicare Advantage Costs:
Because Medicare Advantage plans are provided by private insurers, costs will vary between plans. The federal government pays these insurers a fixed amount per month, but consumers still have to pay the following:
- Part B Monthly Premium: $134 to $428.60 depending on your level of income;
- Additional Monthly Premium: this cost varies depending on the private health plan you have;
- Annual Part B Deductible: $183;
- Additional Annual Deductible: Some plans may charge an additional annual deductible, but only few plans do this; AND
- Co-Insurance/Co-Pay: Varies plan-to-plan depending on the coverage.
Medicare Part D: Prescription Drug Coverage
Part D is voluntary and is actually a separate policy that you can buy from a Medicare-approved private insurer. Part D provides coverage for the most common generic and brand name prescription plans, but because it’s through your choice of private insurer, the list of which medications are covered can vary from one plan to the next. The easiest way to remember Part D: D is for drugs.
Medicare Part D covers:
- Outpatient prescription drug coverage.
Things Part D doesn’t cover:
- Everything else under Parts A and B.
Medicare Part D Costs:
This all really depends on the insurer that you choose.
- Monthly Premium: This varies depending on the private health plan you’ve chosen;
- Annual Deductible: Again, this amount depends on the private insurance you’ve chosen to purchase;
- Co-Insurance/Co-Pay: Often 25% of the costs of your drugs, but can vary depending on your private health insurance plan; AND
- Costs in the Coverage Gap/”Donut Hole”: Once you’ve spent $3,700 on prescription medication covered under your private insurer, you get into a coverage gap where you’re responsible for a higher percentage of a drug coverage costs. This is a frustrating and contentious aspect of Medicare Part D. You can read more into it through the Medicare website.
How to Enroll in Medicare
Enrollment in Original Medicare (Parts A and B) is usually automatic. You’ll get your Medicare card either:
- 3 months before your 65th birthday, OR
- On your 25th month of getting disability benefits.
In some cases, such as if you’re not getting Social Security benefits, you’ll need to manually sign up for Medicare coverage.
If you have ALS or some disability where you get disability benefits, you’re automatically enrolled in Parts A and B once your disability benefits begin. In most other cases you have to enroll through Social Security.
Sign-Up Period for Medicare
Initial Enrollment Period
Depending on when you first become eligible for Medicare, you have a 7-month Initial Enrollment Period when you can sign up for Original Medicare (either or both Parts A and B).
For most, you first become eligible when you turn 65. In this case, the 7-month Initial Enrollment Period includes:
- The 3 months before the month when you turn 65 years old;
- The month of your birthday; AND
- The 3 months after your birthday month.
It’s important that you use this opportunity to sign up for Original Medicare, especially for Part B. If you don’t enroll in Part B during your Initial Enrollment Period, you’ll have to pay a late enrollment penalty – and you’ll have to pay the penalty for as long as you hold on to your Part B coverage.
Special Enrollment Period
A Special Enrollment Period is offered usually in just two cases:
- If you’re covered under a group health plan based on current employment; OR
- If you’re voluntarily serving in a foreign country.
General Enrollment Period (January 1 – March 31)
General Enrollment Period occurs yearly between January 1st and March 31st, and is available as an option if:
- You didn’t sign up for Part A and/or Part B during your Initial Enrollment Period; AND
- You aren’t eligible for a Special Enrollment Period.
You may have to pay higher premiums for late enrollment in Part A and/or Part B.
Choosing the Right Medicare Coverage
Depending on your current health, your lifestyle, and your financial situation, you’ll need to choose the right Medicare coverage that’s customized to your specific needs.
If you need help choosing the right path, check out our guide on how to choose the right kind of Medicare coverage.
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